Close to 700 koalas have been killed off by authorities in southeastern Australia because overpopulation led to the animals starving, an official said Wednesday, sparking claims of mismanagement.

Victoria state Environment Minister Lisa Neville said the koalas were euthanised around Cape Otway near the scenic tourist drawcard the Great Ocean Road, in 2013 and 2014, with a caravan site owner saying the whole area "smelt like death" before they were put down.

"The intervention was necessary to prevent suffering of koalas because they weren't able to find enough food," Neville said in a statement.

Neville said 686 koalas were found to be in poor health and were humanely killed by veterinarians in consultation with koala experts and animal welfare personnel.

The minister said she was seeking expert advice on how to manage the issue and wanted to be open with the community on the process, but has not ruled out further similar operations.

"Experience suggests that moving these koalas does not work and that can in fact cause even greater suffering," she told the Australian Broadcasting Corporation.

"We need to have a look at a koala management strategy to see whether we can reduce that population growth which continues at a very fast pace."

Despite the koala population in Cape Otway booming, the much-loved furry animal has been under increasing threat in recent decades elsewhere, particularly from habitat loss, disease, dog attacks and bushfires.

The Australian Koala Foundation, which estimates there are now less than 100,000 of the unique animals in the wild, blamed long-term mismanagement for the deaths at Cape Otway.

"What they have done is shocking," said chief executive Deborah Tabart.

"Why did they let it happen in the first place? I think the government should hang its head in shame."

Starvation 'horrific to witness'

The Cape Otway population has grown since koalas were relocated there from French Island, off Victoria, in the 1980s, said Deakin University expert Desley Whisson.

Wild koalas have been under increasing threat in some parts of Australia in recent decades, with a plunge in population numbers from habitat loss, disease, dog attacks, bushfires and other factors.

French Island had been a safe haven for the animals when they were driven to near extinction by hunting for their pelts in the early 1900s.

But by the 1980s, the population was getting too big and some were moved to Cape Otway and elsewhere.

But with no natural predators, such as wedge-tailed eagles, or bushfires which would otherwise have kept populations under control, the numbers proliferated.

Frank Fotinas, who runs the Bimbi Park Caravan Park at Cape Otway, said before the killings, the whole of the cape smelled of dead koalas.

"It smelled like death," he told the ABC, adding that the animals had stripped the trees bare in the hunt for food.

Whisson, who was involved in last year's operation, said the koala management was never done in secret and nor was it a cull, which is illegal for koalas in Australia.

"It was putting koalas out of their misery," she told AFP, adding that she believed there could easily have been a further two koalas put down at the time for every one killed.

Whisson said that ahead of the operation overpopulation had become acute in the area, with 15 of the 20 animals she was radio tracking at the time dying of starvation.

"It was horrific to witness," she said.

While Whisson had no doubt koala numbers were in decline in states such as Queensland and New South Wales due to development and habitat loss, she said it was different at Cape Otway.